Maschinenfabrik Berthold Hermle Ag Pref FWB:MBH3

Maschinenfabrik Berthold Hermle : Business Report 2023

Published July 12, 2024 at 5:46 a.m. UTC

Source: MarketScreener

Annual Report

www.hermle.de

2023

CONTENTS

HERMLE	3
Key figures	3
Company executive bodies	4
Company history	5
Highlights 2023	6
Introduction by the Management Board	8

REPORTS	10
Report of the Supervisory Board	12
Directors' company and consolidated report	16
HERMLE share	32
From the company:
Shaping the future	34
CONSOLIDATED FINANCIAL STATEMENTS 40
Consolidated balance sheet	42
Consolidated statement of comprehensive income	44
- Income statement	44
- Statement of comprehensive income	45
Consolidated cash flow statement	46
Consolidated equity statement	48
Notes to the consolidated financial statements	50
- Development of the consolidated fixed assets 2023	50
- Development of the consolidated fixed assets 2022	52
- Consolidated segment reporting	54
Unqualified opinion	85
Assurance of the legal representatives	91
Declaration of compliance pursuant to Section 161
of the German Stock Corporation Act (AktG)	92

FURTHER INFORMATION	94
on Maschinenfabrik Berthold HERMLE AG
Balance sheet	96
Development of assets	98
Income statement	100
Proposal on the appropriation of profits	101
HERMLE worldwide	103

2	Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Indices

INDICES

HERMLE GROUP
												Change
€m	2019	2020	2021	2022	2023		2023/2022

Turnover	463.1	296.9	376.0	474.1	532.3		12.3%

- Domestic	197.6	112.2	139.2	171.5	203.3		18.5%

- International	265.5	184.7	236.8	302.6	329.0		8.7%

Orders received	414.4	242.5	439.1	534.1	494.8		-7.4%

Order backlog	99.3	44.8	107.9	168.0	130.5		-22.3%

Investments	16.3	21.6	8.6	10.4	33.2		219.0%

- Property, plant and equipment 1	13.3	21.6	7.6	10.4	33.2		219.0%

- Financial assets	3.0		-	1.0		-		-	-

Depreciation	10.4	10.4	11.3	11.2	11.6		3.6%

- Property, plant and equipment 1	10.4	10.4	11.3	11.2	11.6		3.6%

- Financial assets		-		-		-		-		-	-

Operating result	114.2	54.2	74.6	99.6	115.8		16.3%

Net income	84.2	40.1	54.9	71.8	87.6		22.0%

Cash flow	94.6	50.5	66.3	87.8	99.1		12.9%

Balance sheet total	360.1	347.0	415.0	467.8	506.4		8.3%

Equity	260.4	274.4	305.2	334.8	366.9		9.6%

Employees (reporting date 31 December)		1,319	1,304	1,320	1,383	1,511		9.3%

1 Property, plant and equipment and intangible assets

For ease of reading, the terms used in this annual report, such as employee and worker, should be broadly representative and inclusive for all persons.

Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Company executive bodies

COMPANY EXECUTIVE BODIES

SUPERVISORY BOARD

MANAGEMENT BOARD

Dietmar Hermle	Günther Beck
Chair,	Areas of responsibility:
Entrepreneur	Finances Information technology
Lothar Hermle	Franz-Xaver Bernhard
Deputy Chair,	Areas of responsibility:
Industrial Foreman	Research & development Sales
Dr. Sonja Zobl-Leibinger	Benedikt Hermle
Deputy Chair,	Areas of responsibility:
Lawyer	Materials management . Production . Service .
	Human resources (since 1 May 2023)
Dr. Wolfgang Kuhn
Entrepreneur

Gerd Grewin*

Industrial Foreman, Control Technician, Chair of the Works Council

Andreas Borho*

Industrial Business Management Assistant

FULLY AUTHORISED REPRESENTATIVE

Gabriele Peyerl (until 30 April 2023) Area of responsibility:

Human resources

*Elected employee representatives	Additional Management Board and Supervisory Board positions are
	stated on page 84.

4	Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Company history

COMPANY

HISTORY

1938	Founding of Berthold HERMLE, a bolt and machine screw manufacturer, in the southwestern German town of Gosheim. Production
	of turned parts begins.
1953	Conversion to Maschinenfabrik Berthold HERMLE KG.
1956	Centrifuge production begins.
1957	Milling machine production begins.
1972	Presentation of first HERMLE universal milling machine.
1975	Production of numerically-controlled milling machines.
1978	Start of production of CNC controlled milling machines.
1984	Conversion to Maschinenfabrik Berthold HERMLE GmbH & Co.
1990	Conversion to Maschinenfabrik Berthold HERMLE AG, company is publicly traded on the stock exchange.
	Company opens new sales and administration building in Gosheim.
1992	Start of comprehensive restructuring of the HERMLE Group in Germany and abroad.
1995	Optimisation of company as part of the 2000 Concept.
1997	HERMLE Vertriebs GmbH commences operations.
1998	Founding of HLS HERMLE Systemtechnik GmbH as a joint venture for customer-specific automation of HERMLE machines.
1999	HERMLE (Schweiz) AG is founded in Switzerland as a sales and service hub.
	Opening of the new Technology and Training Centre in the Kassel-Lohfelden business park.
2000	Our technology and training centre opened at the company headquarters in Gosheim.
2001	US branch becomes independent entity as HERMLE Machine Co. LLC.
	Founding of HERMLE Nederland B.V.
2003	Service and sales centre commissioned in North America.
2004	Opening of the customer service centre at the installation location in Gosheim.
	Opening of the sales branches and representative offices in China, Austria and the Czech Republic.
2005	Founding of the export business HERMLE WWE AG in Switzerland and a Russian subsidiary.
2006	Founding of HERMLE Italia S.r.l.
2009	During the financial crisis, the concept of the breathing company proves itself once again: Despite the drop in demand, HERMLE
	manages to make a profit and avoid job losses.
	Founding of a branch in Denmark, as well as a representative office in Bulgaria.
2011	HERMLE opens a branch in Poland.
	A new warehouse and logistics centre commences operations at the company headquarters in Gosheim.
2014	At its Gosheim location, the company moves into a state-of-the-art production facility for the assembly of large machines and
	automated plant and opens a new restaurant for customers and visitors.
2016	Second production facility is established in Zimmern ob Rottweil.
2017	Expansion of machining operations at the location in Gosheim.
2018	Acquisition of all shares in the former joint venture HLS, which specialises in automation.
2019	Founding of a subsidiary in Mexico.
2020	HERMLE manages to overcome the economic slump caused by the COVID-19 pandemic and keep its workforce intact.
	Founding of HERMLE South East Asia (Thailand).
	Opening of an ultra-modern sheet metal production facility at the location in Zimmern ob Rottweil.
	As a full-range supplier, HERMLE now supplies automation solutions for the entire spectrum of machines.
2022	HERMLE establishes a subsidiary in China.

Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Highlights 2023

HIGHLIGHTS 2023

APRIL

Open House: Original with cult status - The HERMLE Open House opens its doors again without COVID-19 restrictions. We welcome approx. 2,500 guests from 1,100 companies and over 30 countries to the event, the number of visitors is almost back to pre-COVID-19 levels. For four whole days, interested parties are provided with a comprehensive showcase of HERMLE services, machining centres, Industry 4.0 solutions as well as automation and digitalisation components. Over 20 machining operations specially programmed and set up for the Open House demonstrate the high precision and reliability of HERMLE products. The star of the exhibition is undoubtedly the lovingly milled, 1:5 scale VW T1 van - yet another true cult classic.

JUNE

HERMLE subsidiary in France - To serve the key French market directly in the future, HERMLE establishes a subsidiary in the country in March: HERMLE France SAS, based in the greater Paris area. This enables us to intensify contact with our customers in France, something that was previously handled by a trading partner. The new company commences operations in June and represents HERMLE at the important Paris Air Show.

JULY

New hub in the USA - Speed is the key to successful service. HERMLE USA Inc. therefore decides to open a new service branch in Phoenix, Arizona. Customers in the western half of the USA can be accessed and supplied with spare parts faster and thus more cost-effectively from this new hub.

Big party for the HERMLE team - Following a three year break due to the COVID-19 pandemic, HERMLE employees celebrate a big summer party at the company headquarters in Gosheim. The event, which is very popular with the employees, helps to further strengthen the already existing strong bond within the HERMLE team. Roughly 900 employees come together to exchange ideas and have a good time.

6	Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Highlights 2023

SEPTEMBER

HERMLE at EMO - HERMLE also attends EMO 2023 in Hanover, the world's leading trade fair for production technology that is not to be missed. Around 92,000 trade visitors from approx. 130 countries learn about the latest innovations and trends in the industry. Spread across 560 m² of exhibition space and true to the motto "everything from a single source", HERMLE exhibits three fully equipped automation solutions and a mill/turn machining centre. All machines showcase the technological advantages of HERMLE products with interesting machining operations.

NOVEMBER

Photovoltaic system connects to the grid - HERMLE puts the first module of a new photovoltaic system into operation at its production site in Zimmern ob Rottweil. Once completed, the system, which consists of two equally sized modules on two roofs, is expected to offer an average yield of around 1,650 megawatt hours a year. Thus, on days with sufficient sunlight, HERMLE will be able to fully meet the location's daily electricity demands and operate fully CO2 neutral without electricity from the grid.

New HERMLE company in South East Europe - HERMLE establishes yet another international company: HERMLE South East Europe S.R.L. It is based in Medias/Romania, north-west of the capital Bucharest. Business operations in the South East Europe region will be systematically managed and expanded from this location.

25 years of HLS - The automation specialist of the HERMLE Group, HLS HERMLE Systemtechnik GmbH, celebrates its 25th anniversary. Founded in November 1998 for the customised automation of HERMLE machines, HLS initially developed pallet changers. This was soon followed by the first robot systems and further automation components. Focussing from the start on automation has proven to be the right and far-sighted decision. Today, this business segment plays a key role in HERMLE's success.

Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Introduction by the Management Board

INTRODUCTION BY THE MANAGEMENT BOARD

DEAR SHAREHOLDERS, BUSINESS PARTNERS AND FRIENDS OF THE COMPANY,

In 2023, Maschinenfabrik Berthold HERMLE AG again performed satisfactorily despite facing some very difficult challenges. This was down to the high order backlog from the previous year, the continued solid order intake, which lasted until the second quarter of 2023, and the significantly improved supply chain situation.

Group turnover rose by around 12% to more than €m 532 over the past business year - a new record high. Sales of automation solutions featuring HERMLE's own digitalisation components grew particularly strongly, allowing us to outpace the industry average slightly. Our strategy of focussing increasingly on automation has, therefore, proven successful. In this segment that is so full of potential, we offer our customers customised complete solutions from a single source - ranging from individual machines with simple pallet changers to large production solutions with complex robot systems and coupled with intuitively operable software.

Income also rose to an unprecedented level in 2023: The Group's yearly surplus increased by 22% to €m 87.6. In addition to slightly higher capacity utilisation, we additionally benefited from an improved product/country mix and the ability to pass on some of the more moderate increases in energy and material prices. The higher result also further underpinned our financial and asset position, which was clearly reflected in a further increase in the equity ratio to 72.5% and extensive liquid funds totalling €m 111 at the end of 2023.

This is a solid foundation on which to propose increasing the dividend at the shareholders' meeting in July: Subject to the approval of the ordinary shareholders, we propose a payout of €15 per ordinary share and €15.05 per preference share. In the previous year, the figure was €11 and €11.05 respectively. Based on the closing price in 2023, which was set at €216 on

the Stuttgart Stock Exchange, this results in a dividend yield of 7% for the preference shares. A total of €m 75.1 of HERMLE AG's balance sheet profit, which totalled €m 156 in 2023, is to be received by the shareholders, leaving the company with sufficient funds for current and upcoming major investment projects.

What factors drove the positive development in 2023? Our machine tools and automation solutions set technological standards, offer high quality and exceptional efficiency, are customised to meet our customers' needs and ensure economical production. Moreover, users of our products also benefit from an extremely reliable, fast and competent service. In addition to these customised responses to our customers' needs, our company benefits from broad market positioning both regionally and across various sectors. We also have ultra- modern and efficient structures in place, not only in production but throughout all areas of the company, great flexibility and, most importantly, an outstanding team of employees. We would like to express our sincere thanks to all the employees of the HERMLE Group worldwide. Without them, HERMLE's above- average business performance over many years would not have been possible.

In 2023, the number of HERMLE employees rose by almost

130 to more than 1,500 people. All of them are key to both operational development and the implementation of essential projects to secure HERMLE's long-term future. These projects are continuously advanced independently of day-to-day business operations. For example, the internationalisation of our activities: Last year saw the establishment of new sales and service companies in France and Romania, as well as a service hub in the western USA. In 2024, we are looking to expand our global reach, for instance in Turkey, India and various African and South East Asian countries. Or the R&D sector: In 2023,

8	Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

HERMLE / Introduction by the Management Board

we started converting the internal hardware and software architecture of our machines to the next generation, which we will gradually introduce to the market. The first Generation 2 machines were unveiled at the 2024 Open House, with more to follow over the course of the year.

Site development also plays a key role: To boost capacity and meet the growing demand for automation solutions, we constructed new buildings at our production site in Zimmern ob Rottweil in 2023. These additions have expanded our mineral casting production facility and storage capacities and provide a second facility for manufacturing large parts. Interior construction work is currently being completed and operations are planned to commence there in the fourth quarter of 2024. We are also installing a photovoltaic system on the roofs of the buildings in Zimmern, the first section of which has already been put into operation. Cutting-edge technical facilities for spindle assembly were set up at the company headquarters in Gosheim in 2023 and should be in operation by the middle of this year. The next step will involve initiating preparations for the construction of a larger application centre to showcase our entire range of machining centres and automation solutions, along with a new canteen for our employees.

From an operational perspective, 2024 will be much more challenging than 2023. The decrease in demand forecast for the previous year did not materialise until May 2023, and thus later than anticipated. As a result, we were able to maintain

a solid order backlog at the beginning of 2024. However, the downward trend has continued throughout the first few months of 2024. The reasons for this are manifold. On the one hand, the weak domestic economy, challenging economic and political conditions in both Germany and Europe, rising labour and material costs as well as numerous geopolitical conflicts and associated risks are all contributing to a reluctance to

invest in the industry. On the other hand, increasing red tape and regulations are causing problems for both us and our customers. Examples include slow export approval processes, the German Supply Chain Duty of Care Act and increasingly detailed regulations regarding sustainability reporting. Additionally, the growing shortage of skilled labour and the intricate balancing act between rising customer expectations, particularly in the service sector, and the evolving work-life balance demands of employees further complicate the situation.

Predicting future developments is never an easy task, but we anticipate continued deterioration in the coming months. In 2024 as a whole, Group turnover is unlikely to reach last year's strong level. Even in the best-case scenario, it may fall short, and in an unfavourable one, it could drop by up to 20% or more. The result is likely to fall by at least 10% to 20% more than turnover due to costs and capacity utilisation. Such losses would obviously be unpleasant, but HERMLE is well prepared to deal with them. Our concept of a breathing company, which allows us to adjust for fluctuations in demand with a highly flexible working hours system, along with our substantial equity and liquidity reserves, provides us with a strong level of resilience to short-term developments compared to the rest of the industry.

In any case, we focus on sustainable trends rather than fleeting ones. In the medium term, the overall demand for HERMLE machining centres and automation solutions is expected to continue worldwide. They help address both cost pressures and the shortage of skilled labour. Implementing the necessary technological changes in numerous areas - such as mobility and climate change - will also be challenging without the extremely dynamic, high-precision machine tools manufactured by HERMLE.

Yours faithfully,

	Franz-Xaver Bernhard	Benedikt Hermle
Management Board	Management Board	Management Board

Maschinenfabrik Berthold HERMLE AG / Annual Report 2023

REPORTS

10	Maschinenfabrik Berthold HERMLE AG / Annual Report 2023